A more financially literate populace is good for business. Fintech firms are well positioned to take advantage of this opportunity by engaging with younger clients on their terms, Jessica Ellerm writes.
OPINION | Conversations outside of numbers – they’re the hardest thing in finance land.
Discussing a product without jumping straight to dollars and cents is something few have mastered. To avoid directly referencing risk and return or percentages and per annums when trying to explain how a financial instrument works is one of the toughest challenges.
But if you’re a super fund facing a Baby Boomer de-cumulation avalanche and want to reach a new audience, that’s exactly what you’re going to need to do. You have to find a way to talk about money without talking about money. Ironically, that’s the way you’ll win new customers. Younger clients are hungry to be educated, but on their terms.
The 2015 S&P Global Financial Literacy Survey found that two-thirds of the world’s population is financially illiterate. And while a large proportion of that is made up by the economies not built on banks, it might surprise you to learn only 64 per cent of Australians passed the study’s financial literacy test.
Shifting the dial on financial literacy isn’t just about the feel-good factor, or acquiring more customers either. Even a 1 or 2 percentage point increase in financial literacy could boost GDP, wage growth and living standards.
To address this problem, we have to rethink the entire system, along with the products inside it and the language we use. Only then can we hope to move from a conflicted and dependency-oriented advice landscape to one where individuals are empowered to evaluate and decide for themselves.
This is where establishing new advice delivery models based on behavioural thinking becomes a critical first step to influence change. This should form the foundation for the technology and communication that addresses the next generation’s expectations. It should also encourage more progressive regulation, to empower the industry to provide it. Doing this has the potential to help Australia catch up on the literacy front.
Central to helping people learn about money is better leveraging their own personal financial data, to nudge them in the right direction, whenever and wherever they access advice. The days of going to a planner or adviser’s office twice a year are over. The mobile phone is now the meeting room.
Lower-cost products built on this best-of-breed technology, paired with fintech-friendly regulation, form the seeds of an advice revolution governments would do well to encourage, if they ever want to see broader systemic change, not to mention a healthier buffer on their pension kitty.
This is the opportunity on which fintech businesses will start to stake a claim, and superannuation is certainly in their sights.
Wouldn’t it be exciting to see a new superannuation business that innovated not only in how it technically built and delivered a product, but also in how it helped people become more financially literate, pursuing ideas and products that made people smarter?
That would come pretty close to being a fundamental innovation, rather than just tinkering at the edges. It would have an enormous impact on literacy and savings rates, and the potential to shift the economic course of history. It would treat member engagement with their money not as an afterthought but upfront.
It would make us smarter about money. It would use fintech to become a finance business that added value for its customer community every time it signed up a new member. This is what we hope to do at Zuper.
Jessica Ellerm is the chief executive of Zuper Superannuation. She will be a speaker at the 2018 Investment Magazine Post-Retirement Conference, to be held in Sydney March 20. For more details visit the event website.